The Ministry of Finance's proposed tax reform plan plans to impose a 19% VAT on online gambling platforms, causing widespread concern in the industry. The measure will take effect in February 2025, and operators criticize it for causing a decline in medical system revenue and threatening the sustainable development of the industry.
Media interviewed Colombian gambling regulatory lawyer Tatiana María Vásquez, who analyzed the current market situation and the possible impact of tax reform.
Current Industry Status and Challenges
Colombia has become a benchmark for online gambling regulation in Latin America and is the first country to establish a localized gambling licensing framework. This system has promoted industry growth and contributed a large amount of funds to the public health system.
However, after the implementation of Decree No. 175 in February 2025, player deposits will be subject to a 19% VAT until the end of the year. In the first four months after the policy was implemented, the average monthly payment from authorized companies to the medical system dropped from 40 billion pesos to 28 billion pesos, a decrease of nearly 30%.
Vásquez pointed out that this tax policy has a huge impact on legal operators: for every 100 pesos deposited, the operator's actual income is about 30 pesos, but 19 pesos VAT must be paid, accounting for more than 60% of the net income. This not only threatens business sustainability but also affects health, employment, and investment in responsible gambling programs. Internationally, almost no jurisdiction imposes a general VAT on online gambling; the standard practice is to levy a special gambling tax on GGR or NGR to ensure competitiveness.
Response Strategies
The industry union is actively promoting a unified counter-proposal, seeking a tax system consistent with international best practices to ensure a fair and sustainable fiscal model. Vásquez stated that imposing VAT on online game deposits will force operators to bear a high tax burden, reduce medical contributions, and may lead to players moving to illegal platforms. She suggests adopting a single tax system based on GGR or NGR, which conforms to international practices and ensures the competitiveness of legal gambling.
For foreign investors, she emphasizes the need to adapt to three aspects: company and regulatory levels (establishing companies and obtaining licenses), operational levels (integrating local payment methods, cultural adaptation, responsible gambling support), and compliance levels (anti-money laundering, data breach prevention, advertising responsibility).
Cross-border Regulation and Emerging Trends
Colombia faces challenges in coordinating regulation with other Latin American jurisdictions: differences in licensed market models, inconsistent data protection standards, and a lack of unified mechanisms for payment and advertising regulation.
Artificial intelligence can be used to combat illegal gambling, including monitoring domain names, analyzing payment patterns, detecting fraud, and abuse of bonuses, but must comply with legal and data protection regulations.
In terms of advertising responsibility, three major principles should be followed: prohibiting the promotion of illegal platforms, providing risk warnings, and excluding minors and vulnerable groups through age verification.
Esports and cryptocurrency gambling also pose new regulatory challenges. Although esports can be used for gambling, online game regulations have not yet clearly defined it; although cryptocurrencies are popular, they are not part of the formal financial system in Colombia, and regulations prohibit their use for payments. A regulatory sandbox may be a viable approach to test new gambling models in a restricted environment.
Suggestions for Attracting Foreign Investment
Vásquez pointed out that to attract foreign investment, Colombia needs to provide clear rules and a fair competitive environment:
Tax certainty: Taxes should be based on actual income rather than deposits.
Simplified licensing process: Simplify the authorization and contracting process through Coljuegos, reducing administrative costs.
Advertising flexibility: Allow new operators to invest more in advertising initially to distinguish between legal and illegal services.
Strengthening the fight against illegal activities: Prevent unlicensed operators from obtaining transaction and content support, ensuring the safety of the regulated market.
This series of measures will determine whether the Colombian online gambling industry can maintain sustainable growth under VAT pressure while ensuring public resources and player safety.
